German fund halts redemptions on ABS woes

SarahTurner

LONDON (MarketWatch) -- German fund manager Union Investment suspended redemptions in one of its funds, arguing that it didn't want to be a forced seller of assets in a market in which would command steep discounts.

The fund has less than 1 billion euros ($1.4 billion) in assets under management, he said.

"Prices in the market aren't realistic at the moment. We wanted to protect clients invested in this fund," he said.

Temme said that, although the fund has less than 6% exposure to the U.S. subprime mortgage market, the subprime crisis has had an effect on the market generally.

"If a client wanted to withdraw money from the fund we would have to sell the shares at a reduction because prices aren't realistic. We want to wait for the market to get back to normal," he said.

The fund at the end of June held over 1.07 billion euros of assets, with investments ranging from credit-card receipts, mortgage-backed securities and collateralized bond obligations, according to a company document.

The fund has been in existence since 2001. It was only available to institutional investors in Luxembourg and Germany.

Union is hardly the only fund to have run into trouble amid credit-market jitters. Bear Stearns took a similar step in halting redemptions of its Asset-Backed Securities Partners fund.

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